Financial Planning for Life 

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Address:

San Antonio Offices:
18756 Stone Oak Pkwy, Ste 200
San Antonio, TX 78258
Phone: 210.998.5608
Fax: 210.855.3252

17803 La Cantera Terrace, Suite 7101 
San Antonio, TX  78256
Phone: 210.686.9000
Fax: 210.855.3252

Austin Offices:
1250 Capital of Texas Hwy S.
Building 3, Suite 400
Austin, TX 78746
Phone: 512.329.1940
Fax: 888.600.7671

9442 North Capital of Texas Hwy
Plaza One, Ste 500
Austin, TX 78759
Phone: 210.240.1689    
Fax: 888.600.7671 
 
Fair Oaks Ranch Office:
8000 Fair Oaks Pkwy, Suite 104
Fair Oaks Ranch, TX 78015
Phone: 210.530.1270
Fax: 888.600.7671

Phone:

Help with College: A Gift for Your Grandkids

College graduates generally earn more, have lower rates of unemployment, lead healthier lifestyles, and are more active citizens than those without a degree.1 One estimate places the lifetime value of a bachelor’s degree at $2.8 million.2

That kind of opportunity requires a substantial investment that can be overwhelming even for families who are on solid financial ground. For the 2017–18 academic year, the average annual cost for tuition, fees, room, and board was $20,770 at a four-year public university and $46,950 at a nonprofit private university.3

Helping a grandchild obtain a college degree could be life-changing for the student and bring joy to you as well. However, to maximize the gift, it’s important to consider the potential ramifications for student aid and taxes.

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Consider the FAFSA

The Free Application for Federal Student Aid (FAFSA) is the standard application for need-based student aid. Some schools also require additional, more detailed applications. A direct gift to your student would be included under the student’s income and savings on the FAFSA and may have an outsized effect on aid.

Depending on the size of your gift and the student’s other sources of funding, you might consider waiting until his or her senior year of college, after all financial aid has been finalized. Or you could wait until graduation and help pay back student loans.

Giving to the parents rather than the student is also an option. Parent resources must be entered on the FAFSA but generally count for significantly less than student resources in financial aid calculations. Under the federal aid formula, students must contribute 20% of their assets each year toward college costs, and parents must contribute about 5.6% of their assets or less, depending on their situation.

Gift Taxes

The gift tax would probably not be an issue unless you plan very large gifts over your lifetime. In 2018, you may contribute $15,000 ($30,000 combined if you’re married) to any number of individuals without being subject to the gift tax. Gifts above the annual exclusion may be applied toward the combined lifetime gift and estate tax exemption, which is $11.18 million in 2018 ($22.36 million for a married couple). Tuition (but not room and board charges) paid directly to the school is not subject to the gift tax, but any such payments would likely reduce need-based financial aid.

Be sure to consult a tax professional if you have questions about gift or estate taxes.

 
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